The FCI is mandated to procure & stock food grains (primarily wheat & rice) to ensure food security & implement the various schemes of the government. As per data on the FCI portal, the wheat stick at the beginning of July 2022 was just above the minimum required level while the rice stock was better placed.
India ranks next only to China in the production of Wheat and Rice in the world. However, the standing differs when the question of the exports of these food grains is concerned. India is the largest exporter of Rice in the world but is only a marginal player as far as the export of wheat is concerned.
Off late, India is making efforts to improve its position as a supplier of wheat in the global market. As both Russia & Ukraine are among the top wheat exporting countries, their ongoing conflict has created an international demand for wheat supply. However, amidst estimates of lower production of wheat, there has been a change in India’s stand on restricting wheat exports. Factly’s detailed story on the trends in export of Rice & Wheat can be read here. Controlling the rising wheat prices and ensuring food security in the country are cited among the reasons to impose an export ban despite the increase in international demand.
All these developments have brought to focus the availability of food grain stocks in the country. The Food Corporation of India (FCI) is mandated to maintain satisfactory levels of food grain stocks to ensure food security. The increasing buffer stocks with FCI have traditionally been a cause of concern because of storage & other concerns. Factly’s story on the increasing buffer stocks can be read here. Amidst reports of reduced estimates of wheat production, we look at the stock position of rice & wheat with FCI and the trend over the years.
Wheat Stocks in Central Pool during 2022 comparatively lower during same period in previous years.
The FCI maintains information on the food grain stocks in the Central Pool at the beginning of the month. The information includes the stocks for Rice, Wheat, Un-milled Paddy, and Coarse grains. The stocks with FCI include ‘Operational Stocks’ and ‘Buffer (Reserve) Stocks’. Operational Stocks are to meet the monthly demand under the ‘Public Distribution System’ (PDS) to ensure Food security. The buffer stocks are maintained to meet any exigencies or to cover any shortfall in procurement. Here is a look at the trends in the stock position of Wheat and Rice.
Wheat: At the beginning of the current month i.e., September 2022, the volume of wheat stock with the Central pool was 248.2 Lakh Metric Tonnes (LMT). It is less than 50% of the stock during the same time in 2021, which was 517.9 LMT. It is only in 2016 that the wheat stock was lower at the beginning of September than it is in 2022 which was a year of low stock.
The trend in a shortfall in the volume of wheat stock at the beginning of the month in 2022 compared to previous years, is observed in all of 2022. Since January, there has been a month-month shortfall in 2022 compared to 2021. Especially, the difference is higher since May 2022. This coincides with the Rabi Marketing Season for the procurement of wheat.
Rice: Compared to the wheat Stocks, the stocks of rice had a lesser shortfall in 2022. During most of the year, the stocks in 2022 were higher than the respective same months in the previous years. The shortfall is only in the recent months of July & September. However, unlike in the case of Wheat, the rice stocks are higher than that of the years prior to 2021. It ought to be seen if the recent trend continues in the coming months.
Stock of Wheat at the beginning of current quarter just above the minimum stock levels.
As the data indicates, the stocks of wheat in the Central Pool in 2022 are much lower than the stock levels in the previous year. The stock position is dependent on various factors including the volume procured and the extent of the stocks distributed. The trends in the stock fluctuate based on these factors. However, ensuring the minimum stocks is necessary to meet the demand for PDS & other schemes. The government of India notifies the minimum stocks that need to be maintained in the Central Pool at the beginning of each quarter. This factors in the procurement season, the distribution, etc. The current food grain stocking norms are in effect from 01 July 2017.
As per the stocking norms, at the beginning of the current quarter i.e., 01 July 2022, FCI is required to maintain a minimum of 245.8 LMT as Operational Stock of wheat and another 30 Lakh MT as a reserve. Hence, the stock level of wheat as of 01 July is ought to be 275.8 LMT. As per the monthly stock position, the total stock of wheat in the Central pool at the beginning of July 2022 was 285.1 LMT, marginally more than the minimum level. As per the stocking norms, wheat stocks at the beginning of this quarter are supposed to be the highest since it follows the procurement season.
At the beginning of the next quarter i.e., on 01 October, the minimum stock needs to be 205.2 LMT, including both operational and reserve stocks. As highlighted earlier, the stock levels of wheat at the beginning of September 2022 were 248.2 Lakh MT, which would reduce further after the take-off for PDS & other schemes during the month.
In contrast, the rice stocks are better placed. At the beginning of the quarter, the minimum required stocks of rice are 115.4 LMT in operational stock and another 20 LMT as buffer stock. The actual stock level of rice as of 01 July 2022 was 317.1 LMT. By the beginning of next quarter i.e., as of 01 October 2022, the Rice stock is required to be at 102.4 LMT. Despite the decline compared to the previous year, the stock levels of rice at the beginning of 01 September were at 244.6 LMT.
Reduction in the procurement of Wheat during 2022
Procurement of food grains and their take-off i.e., distribution are the two influencing factors of the stock position. The higher buffer stocks of rice & wheat built up over the years to a large extent are due to the higher procurement of these food grains by FCI.
As the data indicates, while the trends in the stock position of Rice relatively remained the same, there is a fall in the stocks of wheat. This can be attributed to the lower procurement of wheat in 2022. The procurement of Wheat is part of the Rabi Marketing Season (RMS) which Runs from April-March.
For RMS 2022-23, a total of 187.93 LMT of wheat is procured as per the latest data on the FCI portal. This is only about 43% of the procurement of wheat in the previous season. Since 2010-11, this is the least procurement for wheat. The fall in procurement is observed across all the major states.
Punjab from where the highest volume is procured, only 96.5 LMT was procured in the current season compared to 132.2 LMT in the previous season. In Haryana, it more than halved to 41.9 LMT compared to 84.9 LMT in the previous season. In Madhya Pradesh, which traditionally has the high procurement along with Punjab, the procurement of wheat was 46 LMT compared to 128.2 LMT in the previous season. In Uttar Pradesh, only 3.4 LMT was procured in 2022-23, whereas it was 56.4 LMT in the previous season. In an answer provided in the Lok Sabha in August 2022, the government acknowledged the fall in procurement and stated that procurement of wheat has fallen due to higher purchase of wheat by traders as the market price of wheat had shot up due to the prevailing international geopolitical situation.
On the other hand, there has not been much variance in the procurement of Paddy and Rice, which could be a reason for no major change in the stock position of Rice. It ought also to be noted that the production of wheat in the current year is lower. As per the latest 4th Advance Estimates, the production of Wheat for 2021-22 is estimated at 106.84 million tonnes compared to the 110 million tonnes target. In the previous year i.e., 2020-21, the production of wheat was 109.59 million tonnes.
Apart from NFSA, an additional 346 LMT of Wheat lifted under PMGKAY
There are various Schemes through which the Food Grains are issued from the Central Pool. A major portion of this is for the implementation of NFSA (National Food Security Act). During 2021-22, a total of 217.52 LMT of Wheat and around 273.59 LMT of Rice were distributed under NFSA. In the previous year, it was 221.5 LMT of wheat and 302.4 LMT of rice respectively. Allocation is also made for other welfare schemes.
With the onset of COVID-19, the Government of India announced Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), which aimed at providing Food Security. The scheme was initially announced for the period April-June of 2020 and was further extended five times with the latest extension of PMGKAY-6 being for the period April-September of 2022.
During the 6 phases of PMGKAY, around 346 LMT of wheat and 542.3 LMT of Rice were distributed. During this period, 501.7 LMT of wheat was distributed under the regular NFSA scheme and in the case of rice, it was 678.5 LMT. The additional wheat lifted under PMGKAY might have had a bearing on the buffer wheat stocks. However, lower production and lower procurement of wheat have compounded the impact on wheat stocks, the impact of which is not seen in the case of rice.
Featured Image: Food grain stocks